Performance Fee

performance fee

A fee paid to an investment manager based on the performance of a client's portfolio, determined by a specified standard. For example, an investment manager might be paid a regular fixed fee plus an incentive fee based on the change in value of the client's portfolio. Also called incentive fee.

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Performance Fee

A fee paid to an asset manager or other investment adviser whose investment decisions perform particularly well. When an asset manager makes money for clients, he/she also makes money for the company for which he/she works. These companies offer performance fees in order to encourage wise (and profitable) investments. Performance fees usually come out of the portfolios that do well, rather than out of the company's general funds. They are also called incentive fees. See also: Bonus, Manager Universe (Benchmark).